A key component of the overall performance of an enterprise is its fiscal performance, typically measured by an integrated set of financial statements—the Profit & Loss (P&L) Statement, the Balance Sheet and the Statement of Cash Flows. Both internal and external constituents of a company rely on these integrated financial statements to provide an indication of the health of the enterprise. The ability for a company to make a good public prediction of its financial performance and then perform according to or better than that prediction is seen as a key indicator of a well-run enterprise. Failure to accurately predict the company's financial performance leads to a loss of confidence in the company's management, with strong negative implications to the company's public valuation. In light of this, it is very important for a company to have in place financial planning systems and processes that help it accurately predict its future financial performance. Another purpose of creating and maintaining forward-looking plans for the company's financial statements is that these plans serve as mechanisms to coordinate various activities within the company, such as selling, manufacturing, recruiting, procuring, investing, etc. These plans help higher-level managers to make intelligent decisions about allocating and re-allocating scarce and valuable resources within the enterprise. This is especially true when these financial plans are tightly linked with the operating plans of the various groups within the company. Most organizations today—both in the government and the private sector—have some sort of processes in place to put together a set of forward-looking financial statements. In some cases, these financial plans are only for internal consumption. In other cases, these plans (or summaries thereof) are shared with the external constituents.
In one commonly used approach, a system of spreadsheets or similar computer tools is used to manage these plans. This approach usually requires the manager of each department, division or business unit to create an independent budget spreadsheet, based upon individual estimates and formulas. Sharing such data within an organization might be accomplished by attaching files to e-mail communications. As a result, higher-level managers may receive numerous submissions from lower-level individuals that these higher-level managers have to consolidate. The lower-level submissions could be presented in inconsistent formats, so that the consolidation of such data is cumbersome and time-consuming. Any change in a lower-level forecast associated with a re-allocation of resources requires this change to flow up multiple levels, usually via a manual and laborious process. As a result these systems are highly deficient when one or both of the following conditions exist:                (a) Financial plans are generated in large, decentralized enterprises: This could include businesses with many budget managers as well as several levels of reporting hierarchies.        (b) Financial plans are revised on a frequent basis due to changing internal and external conditions: This is typical of many enterprises in rapidly changing industries, such as software, high-technology manufacturing, retail, financial services, etc.        
Other past approaches include the use of software products designed for budgeting. Some ERP and CRM software vendors offer budgeting products that support their primary product offerings. For example, Oracle Corporation of Redwood Shores, Calif., offers the Oracle Financial Analyzer with its Oracle Financials accounting package. Similarly, SAP A.G., of Walldorf, Germany offers the Strategic Enterprise Management (SEM) product with its ERP package. Some other software vendors also offer standalone budgeting applications. For example, Hyperion Solutions Corporation of Sunnyvale, Calif. offers the Pillar product. These budgeting products solve certain problems associated with managing financial plans in spreadsheets; however, they still have a number of deficiencies. These limitations primarily arise from the fact that these applications have been designed around automating batch-oriented annual or quarterly budgeting processes, but are not geared towards managing the integrated financial plans for an enterprise with the ability to incorporate changes to plans on a continuous basis.
Some of the problems associated with managing the company's forward-looking financial statements in existing systems are listed below:
(a) Individuals who are carrying out such planning activities need visibility into both revenue forecasts as well as spending plans. Thus, there is a need for a way to receive data from revenue forecasts and plan spending in an integrated way, while tracking plan changes across multiple documents. The past approaches fail to provide adequate integration of various electronic financial planning documents.
(b) Past approaches do not support the ability to automatically communicate changes in plans to those individuals who are affected by them.
(c) Still another deficiency of these past approaches is that they enable the user to prepare only one electronic document or version representing a financial plan. The user, however, may desire to prepare multiple scenarios or “pro form a” plans in order to investigate and evaluate different performance possibilities.
(d) A common operation in the financial management process is to roll up numbers. In this context, to roll up numbers means to consolidate (or aggregate) values from lower level nodes of a hierarchy into higher-level nodes of a hierarchy, or to make information from a subordinate in an organization visible for judgment by his or her superior. Such roll-ups enable a user to view spending values by account, by department, by program, etc. However, a key constraint of past approaches has been that only one organizational hierarchy may be defined. Typically the hierarchy represents departments and business units in one particular way that is analogous to an organization chart of an enterprise. However, this is an undesirable limitation. A particular enterprise may have one hierarchical view of its departments that is based on location in association with function, and an alternate view that is based only on function, or based only on a higher level of authority, such as management only.
Based on the foregoing, there is a clear need for an integrated and automated method for planning financial performance as measured by a set of integrated financial statements for the entire enterprise or subsets thereof (such as divisions, business units, regions, etc.), for informing various relevant individuals about changes to these financial statements relating to their areas of responsibility, and for tracking and validating conformance to the plan. There is also a need for to roll up or aggregate the financial statements in ways that correspond to more than one organizational hierarchy.